AllThingsD » big media

Big Media Thinks Its Future Is in Your Phone

Peter Kafka — Tue, 12 Jul 2011 12:15:31 +0000

Big media companies have never been comfortable with the Web: It’s sprawling, messy, hard to corral and even harder to turn into a profit center.

But many of those same companies tend be much more optimistic about smartphones: The platforms seem manageable and finite, and consumers seem willing to pay for stuff on an iPhone or Android that they’d never shell out for on their laptops.

I think that conventional wisdom is overblown — more wishful than realistic. Still, it’s the conventional wisdom among many media executives I talk to.

Here’s a nice illustration of that, via a new Accenture survey. The consulting firm asked “130 leaders and decision-makers in the Media and Entertainment industry” about their digital content plans, and found a pretty strong consensus — they think consumers and dollars are going to flock to mobile in the next couple years.

What about the iPad and any other tablets? We’ll assume that the big media guys are including tablets in the “mobile/wireless” answer in the second poll question. But note that they’re clearly less enthusiastic about tablets, compared to phones, in the first question.

Accenture notes that if you carve up responses by industry, things change a bit. For instance, publishers who embraced the iPad (and the Kindle, and the Nook) from the get-go think that tablets will be the favorite device for 36 percent of their customers in the near future.

Another Googler Goes to AOL: YouTube Boss Dave Eun Replaces Bill Wilson as Content Boss

Peter Kafka — Thu, 04 Feb 2010 19:46:44 +0000

Former Google sales boss Tim Armstrong has brought a slew of former colleagues with him to AOL, but this may be his highest-profile hire so far: Dave Eun, who has been in charge of content deals at Google and YouTube, will replace Bill Wilson, one of the last high-profile AOL guys from the pre-Armstrong era.

The deal to bring Eun on board was finalized last night, Armstrong told employees in an all-hands email (see below). It’s not a huge shock to see him leave–he’s done a lot of heavy lifting there already, and sources say that like many Google (GOOG) executives who have left recently, Eun felt he couldn’t move much higher in the company.

Eun used to have a role that paralleled Armstrong’s at Google: Make peace with traditional content companies. But instead of trying to sell them ads or negotiate search deals, Eun was supposed to hammer out deals to help get their content onto Google. Most recently, he was focused on getting TV networks and movie studios to put stuff on YouTube, which involved new ad-supported deals (see: Turner, ESPN, etc.) as well as the possibility of renting clips by the stream.

Wilson is a longtime AOL (AOL) guy who rose up the ranks and was pushing for the original content strategy that Armstrong embraced even before the last regime change. He seems to be leaving on better terms than other pre-Armstrong executives, as he’ll be staying with the company until May to manage the transition.

By leaving just as AOL has spun off on its own, Wilson is giving up a chance at some significant upside via low-priced stock options. But sources say Wilson doesn’t have another job lined up.

In an interview this afternoon, Armstrong says that Wilson approached him about leaving the company “several weeks ago”. When I asked him if Eun’s last role–developing partnerships with big media outlets–signaled a shift in AOL’s “roll your own–cheaply” strategy, he made a point of saying that’s not the case. Eun’s hire will simply “supercharge” AOL content plans, he said.

Nonetheless, Armstrong did allow that AOL has some significant content partnerships to announce in the coming months.

Here’s an interview I conducted with Eun late last year, focused on YouTube’s efforts to turn a profit and add new content:

[ See post to watch video ]

And here’s Armstrong’s note to the troops:

As you know, content is at the core of our strategy and we have broad aspirations in this space. We’re focused on scaling our content platforms, production and partnerships to offer quality, original content that will engage consumers and bring them–and their friends–back to our properties time and again.

The fact that we have such a strong foundation in the content space is due to the determination and dedication of Bill Wilson. He saw the opportunity presented by audience fragmentation on the Web and positioned AOL’s content offerings in a number of key verticals. Early in the new year, Bill told me that although he remains committed to the vision and strategy of AOL, he’s ready for a break.

After nine years with the company and after the significant changes we made this year moving from licensing content to becoming a principle in content, he wants to take a step back. Bill built a strong management team and laid the groundwork for the content strategy that we’re now pursuing. While I’m disappointed by his decision, I respect his intent and have asked him to work with me, not only to find his replacement but also to transition with that person to ensure that, as a company, we don’t miss a beat on the execution of our content strategy.

Bill is a talented executive and great person, and I’ll be working with him closely and supporting his transition. Bill cares about AOL, he cares about the content and the products, and he has worked incredibly hard to keep AOL on the media map.

I’m pleased to announce that David Eun will be coming on board in March to head up our content business. Some of you may remember David from his tenure at Time Warner where he helped to oversee AOL as Vice President, Operations, for the Media & Communications Group reporting to Don Logan.

David, who joins us now from YouTube and Google, has had a long career in offline and online content and is the person responsible for managing Google and YouTube’s content partnerships. David brings an impressive breadth of media experience to AOL at an exciting juncture as AOL forges a new future as a high-scale producer and partner in the content space. He will be based in New York.

Bill will be staying on until May 1 to help ensure a smooth transition with David, who begins work March 1.

You may wonder why this topic wasn’t raised during yesterday’s Q4 employee call. My preference is always to share this type of news with you in person, but the facts are that there were elements of this announcement that were not finalized until last night. This drove us to announce this news this morning–to our employees first.

As we have discussed, AOL is now in a phase of transition from playing defense to playing offense. As I said on the employee earnings call yesterday, AOL’s back in the game and we’re playing to win. We have a lot of work to do, but we’re going to do it. Please join me in welcoming David back to AOL and in thanking Bill for his dedication and leadership at AOL – TA

And here’s the release:

AOL NAMES DAVID EUN PRESIDENT OF AOL MEDIA AND STUDIOS

Eun Will Oversee All AOL Content, SEED.com and Studio Operations

New York, NY, February 4, 2010 – AOL Inc. (NYSE: AOL) today announced that David Eun will join the company as President of AOL Media and Studios, effective March 1. As AOL’s chief content executive, Eun will be responsible for the company’s more than 80 content sites, its new SEED.com publishing platform, as well as the newly acquired StudioNow video platform and AOL’s NYC and LA studios.

Eun will report to AOL Chairman and CEO Tim Armstrong and will be based in New York. He succeeds Bill Wilson, President, AOL Media, who will transition out of the role after nine years with AOL.

Until 2006, Eun helped to oversee AOL as Vice President, Operations for the Media & Communications Group at Time Warner Inc. In that role, he helped provide operational oversight and develop new businesses, particularly in digital distribution and broadband content and services, for the company’s AOL, Time Warner Cable and Time, Inc. divisions. Eun joins AOL from Google, where as Vice President, Strategic Partnerships, he was responsible for managing global content partnerships with Google and YouTube.

“David brings an impressive breadth of media experience to AOL at an exciting juncture for the company as we focus on scaling our content platforms, production and partnerships to offer quality, original content that will engage consumers and bring them–and their friends–back to our properties time and again. I’m delighted to welcome him back to AOL as we continue to pursue our strategy and mission in digital content and journalism,” Armstrong said.

“Bill Wilson has been a driving force for content at AOL and under his leadership the quantity and quality of our premium branded and niche offerings have expanded significantly. On behalf of AOL, I want to thank Bill for the energy and dedication he has brought to the role. Bill has been an outstanding leader at AOL,” Armstrong added.

“AOL has a unique opportunity to bring together its core strengths in the key areas of content and journalism, distribution, and advertising to engage its users, partners and advertisers in a way very few companies can. These three elements will be fundamental to success as the media and technology industries evolve and converge,” Eun said. ”And after nearly 15 years of seeing this convergence approach, I couldn’t be more excited to be returning to AOL to help Tim and his team capture that great promise.”

AOL is one of the largest producers of original content on the Web, with more than 80 official AOL and custom-built sites including more than 20 which rank in the top five in their U.S. comScore Media Metrix category. Approximately 80 percent of AOL’s content is originally produced by a growing team of staff and freelance journalists, including nine Pulitzer Prize Winners. AOL also produces more than 50 original video productions a month at state-of-the-art studios in New York and Los Angeles as well as through a network of freelance video producers.

SEED.com, AOL’s premium content management system, assigns, buys and distributes work for all of AOL’s properties. StudioNow, which AOL acquired in January, allows the company to integrate a fully functional video creation platform into SEED and leverage a national network of creative professionals to develop and produce quality video in a way that is rapid, efficient and scalable.

Before joining Time Warner, Eun was a partner at Arts Alliance, a venture capital firm focusing on digital media, information technology and business services. He started his career in media at NBC, where he led some of NBC’s first cross-media initiatives involving television programming, the Internet, and retail consumer products. He is a former management consultant with Bain & Co., and attended Harvard Law School and Harvard College, where he graduated magna cum laude in government.

News Corp.: Conan's Not Coming to Fox Just Yet; Amazon's Ready to Bend on E-Book Pricing

Peter Kafka — Tue, 02 Feb 2010 22:41:33 +0000

Two interesting nuggets from a wide-ranging earnings call today:

News Corp. CEO Rupert Murdoch tried to lower expectations that his Fox broadcast network would hire Conan O’Brien.
Murdoch hinted that his book publishing unit is in line to get a new deal on e-books from Amazon, just as Macmillan has demanded (as will other publishers).

On the second point, here’s my on-the-fly transcription and paraphrasing of Murdoch’s comments about Amazon (AMZN), Apple (AAPL) and e-book pricing. It’s one of the most candid descriptions you’ll hear from a top executive about Big Media’s reluctance to embrace digital distribution at the expense of its existing system and revenue:

“We don’t like the Amazon model of $9.99….We think it really devalues books and hurts all the retailers of hardcover books. We’re not against electronic books; on the contrary, we like them very much” because they cost us less to distribute, “but we want some room to maneuver.” The Apple deal…“does allow some flexibility and higher prices” though e-books will still be lower than print versions. And now Amazon is willing to sit down with us again and renegotiate.

UPDATE: Here’s a more complete transcript from Seeking Alpha:

We don’t like the Amazon model of selling everything at $9.99. They don’t pay us that. They pay us the full wholesale price of $14 or whatever we charge. We think it really devalues books and it hurts all the retailers of the hard cover books. We are not against [inaudible] books. On the contrary we like them very much indeed. It is low cost to us and so on. But we want some room to maneuver in it. Amazon, sorry Apple in its agreement with us which has not been disclosed in detail does allow for a variety of slightly higher prices.

There will be prices very much less than the printed copies of books but still will not be fixed in a way that Amazon has been doing it. It appears that Amazon is now ready to sit down with us again and renegotiate pricing.

Again, it’s impossible to stress how scarring the music labels’ experience has been for Big Media. And they’re determined not to repeat the experience. Their takeaway, though, seems to be that they can stave off digital distribution by keeping prices high and inventory relatively scarce. Hard to believe consumers are going to go for that.

Earlier

A first glimpse at News Corp.’s fourth-quarter earnings (which, due to the company’s weird fiscal calendar, is technically the company’s Q2 for 2010): Pretty good. And much better than a year ago (thankfully). After factoring out one-time charges, the company posted earnings of 25 cents on revenue of $8.7 billion.

The Street was looking for earnings of 20 cents on revenue of $8.23 billion, and analysts were also hoping the company would boost its earnings forecast, due in part to a bump from the ginormous success of “Avatar.” No word on guidance in the earnings release, though.

I’ll pick through the release for other worthwhile nuggets for the next few minutes. And then the real show begins at 4:30 Eastern, when the company’s earnings call–easily the most entertaining one in its peer group due to the censor-free presence of CEO Rupert Murdoch–begins. We’ll be looking for commentary on his battle/negotiation with Google (GOOG), upcoming content deals with Apple and the iPad, his thoughts on paid content in general, a dash of political commentary or two, and an update on the turnaround effort at MySpace.

From the release: A pretty nice quarter at most of the conglomerate’s divisions, including the previously battered broadcast TV and newspaper groups. News Corp. says print revenue at The Wall Street Journal was up five percent and ads on the Journal’s digital network were up 17 percent.

MySpace and the company’s other digital properties, shuffled into the “other” category, don’t get much of a mention, but don’t seem to have done much, not surprisingly.

But News Corp does mention that digital media earnings were down $32 million compared with a year ago, “principally due to lower search and advertising revenue.” And the company lost $29 million on “digital media dispositions”–i.e., the fire sale/giveaways of properties like Rotten Tomatoes and Photobucket.

Here’s the breakdown by segment (click table to enlarge):

Liveblog

CFO Dave DeVoe: “Extremely pleased” with the quarter.

Movies: Revenue up due to decent DVD sales (no MGM problem here). Also high costs due to “Avatar,” but big profits from the movie will be coming in during the next couple quarters.

Broadcast TV: Local ads are improving; the telecom, fast food, finance categories are all improving.

Cable: Revenue is up 18 percent. Affiliate revenue is up 21 percent (more money for Fox News subs), and there was a “single-digit” boost in ad dollars.

Newspapers: Journal dollars are up, operating costs down. Ad revenue got better as the quarter progressed.

Books: Revenue up, expenses down.

“Other”/MySpace: Digital media revenue down, but cost-cutting helped trim losses.

News Corp. is boosting its dividend by 25 percent.

Guidance: The company’s operating income growth rate is expected to grow from single digits to the high teens. Better than anticipated: Film group, TV and cable. But revenue goals for digital media, including MySpace, will take longer than anticipated.

Murdoch sings the praises of content. [I will not argue with him, for now]. “Avatar” is awesome, he says, a “harbinger of fundamental change in the industry.” Also really good: “Alvin and the Chipmunks.” Fun to hear Rupe say “Alvin and the Chipmunks.”

WSJ is the No.1 paper in U.S. in terms of circulation, influence, quality. WSJ.com is a “digital model for newspapers around the world.”

Fox News Channel’s audience is both “loyal and lucrative.” Roger Ailes is doing an “admirable job” [translation: Bite me, Michael Wolff--the author of a recent Murdoch biography].

Last year, Murdoch says, News Corp.’s pay-to-play ideas sounded nutty, but now “the content clan has gathered around our ideas.” Consumers must pay and will pay “to be entertained and informed.” All those awesome new gadgets being made in China and sold at the Consumer Electronics Show need content or they’re worthless. Content, content, content. Get it? Content, content, content.

Murdoch says he’ll be wringing more dollars from cable operators. And “when it comes to online news, we’ll be changing that model too,” adding that News Corp. is in “substantive conversations with device makers on developing subscription models” to deliver content. And don’t forget about 3-D!

Not performing well but “long-term growth drivers”: Sky Italia satellite service. Also Sky Deutschland. And MySpace is “not yet where we want it.” In the last quarter, however, MySpace “started to see signs of traffic stabilization.”

Shout-outs for Chase Carey and other managers (but not by name).

Q&A

Question: How big a deal is retransmission consent in coming years? $40 million a month? $100 million a month?

Chase Carey: No numbers, but it’s going to be a “transforming event.” We have two of top 10 distributors done, more coming. It’s a three- or four-year process to knock these deals out.

Q: Does this fix the broadcast model?

Carey: “Yes, I guess you could say simplistically, it fixes it.”

Q: What’s the timing on an “Avatar” DVD, and what about a sequel? Also, how do TV ads look this year?

Murdoch: For “Avatar,” we think about 60 percent of profits will be in the next six months. Which means the DVD will be coming “as soon as possible,” but the movie will stay in cinemas for a while because we’re doing huge dollars in theaters still. Sequel? “Very early talks about it. Jim has ideas for one. We haven’t come to any agreement with him….Being Jim Cameron, I wouldn’t hold your breath for an early one.” Asked about the economics of a future release (“Will you keep the same revenue split?”), Rupe sort of rumbles and growls and sort of doesn’t have much to say. “Ask anybody; it is very easy to drop a $100 million in a hurry on a film, and we’d like to lay off some of the risk.”

Carey: TV trends for this year are “positive.”

Murdoch: TV stations will be up 18 or 19 percent, but last year was terrible. We’re still down compared with two years ago. Hard to see more than a quarter in advance. In newspapers, it’s hard to see more than a few weeks.

[Missed a question on Sky Italia here.]

Q: What are growth prospects for cable networks? They’ve been driven a lot recently by new subscriber fees. How much longer can you get those boosts?

Murdoch: Overall, “we think we have great potential for growth. Quite a long way to go yet.” Look at how NBCU’s USA is growing.

Carey: In the U.S., we’re moving to “quality over quantity”–we can wring more out of foreign exchange, etc. Fox News is only getting more powerful; it has “great upside.”

Q: Regarding newspapers, what growth came from organic increase versus currency fluctuations?

The majority is from foreign exchange.

Q: Does your guidance assume that the “Avatar” DVD is coming in the next two quarters?

Murdoch: “Yes, but it won’t be 3-D” [which I don't think the analyst was asking about].

Q: Back to retransmission consent: You’ve been getting more and more money from cable guys. Why can’t you get $4 or $5 per subscription for Fox broadcast subs?

Murdoch: “We’re modest people.”

Carey: Hyuk, hyuk. Real answer: It takes time. “We try to approach this constructively. We’ve built businesses with [cable guys], we’ve built valuable cable channels” [translation: patience!]. We want to extract more without killing the cable guys.

Murdoch: That said, we’re asking for the same thing [for broadcast channels] that the cable networks are getting, which “certainly won’t kill the cable companies.”

Q: Please talk about value of film libraries (i.e., MGM). They’re generating big operating profits for cable now. How long will this last?

Murdoch: Regarding the MGM auction, “you can count us out of that one altogether” because others will pay more than we’re willing. And we’re not pursuing the Miramax catalog at all.

Carey: A film library by itself, without new stuff coming through, is a “depreciating asset.”

Q: On guidance: You say the ad market getting better, etc., but it sounds like you’re saying Ebidta growth is slowing.

Murdoch: “We honestly do not have any visibility about the last quarter.”

Q: On books/e-books/Apple, what’s going on with that?

Murdoch: We don’t like the Amazon model of $9.99….We think it really devalues books and hurts all the retailers of hardcover books. We’re not against electronic books; on the contrary, we like them very much, lower costs to us, but we want some room to maneuver. The Apple deal does allow “some flexibility and higher prices” though e-books will still be lower than print. And now Amazon is willing to sit down with us again.

Press Q&A

Q: What’s up with plans to charge for newspapers on the Web?

Murdoch: “Not ready to announce yet [long pause]. We won’t be ready yet to make an announcement.” A “lot of talks with a lot of people.” There will be more to say within the next two months, Murdoch adds.

Q: Are you still going to fall $100 million short on the Google deal?

Murdoch: Yes. People using social networks don’t use search a great deal. Facebook has seen this, too. It’s “really too early to make confident predictions…but from going down, we’re beginning to go up.”

Q: Can we get some details about Time Warner Cable (TWC) deal?

Nope.

What about Conan O’Brien on late night?

Murdoch: If the programming people can show us we can do it and make a profit on it, we’ll do it in a flash. I’m sure there have been conversations with Conan, but “if you mean real negotiations, no.”

[Missed two questions here.]

Q: Another late-night question: If you do go into negotiations with Conan, how do you placate your affiliates?

Murdoch: It’s a different deal than NBC. They screwed up 10 pm, which reduced the lead-in to local news. Our affiliates run syndicated programming at 11:30, though, so it will take time to adjust there.

Call ended. This one seemed short to me.

More or less redundant disclosure: News Corp. (NWS) owns this Web site.

Now Not Showing at iTunes and Netflix: Some of Your Favorite Movies

Peter Kafka — Wed, 10 Dec 2008 21:55:52 +0000

Want to watch nerd-favorite “The Fifth Element” via Netflix’s awesome streaming service? OK, but hurry up–the movie will disappear from the service on New Year’s Day. Want to rent the excellent George Clooney corporate thriller “Michael Clayton” via iTunes? Too late! The movie was there, but now it’s not.

Wait a minute: Hadn’t big media finally gotten religion and agreed to give us, the demanding consumers, everything we want, whenever we want it? Nope.

Hollywood in particular–which still has a big, if declining, business showing movies in theaters and then in other formats–is still interested in protecting its big analog revenue streams for as long as it can.

Translation: Netflix (NFLX) will show you just a slice of the of the 100,000+ movies it has in its regular catalog on its streaming service, because the studios aren’t eager to cut into their DVD sales and rental businesses. Which are way, way bigger than what they’re getting from digital outlets. And even movies that are available for free rental may disappear after a certain period, because the studios have other revenue “windows” to protect, as CNET explains.

The same thing goes for Apple’s (AAPL) iTunes: Even the mighty Steve Jobs can’t force the studios to give his customers unlimited access to their catalogs. This applies to multiple studios, by the way, and both new and old movies. “The Fifth Element” belongs to Time Warner’s (TWX) Warner Bros. studio, and came out way back in 1997, back when Netscape was a big deal. “Michael Clayton” is a Sony (SNE) movie that came out last year.

And by the way, that George Clooney movie really is good–like the excellent 1970s paranoia films brushed up a bit for modern times. And even more poignant after the past few months. I recommend seeing it even if you have to watch it on a screen other than your laptop. Which is exactly what Sony wants.